Sun Hung Kai's Underlying First-Half Profit Rises 60% on Apartment Sales
Sun Hung Kai Properties Ltd., the world’s largest builder by market value, said fiscal first-half underlying profit rose 60 percent after it sold more apartments in Hong Kong and rents increased.
Profit excluding property revaluations rose to HK$10.4 billion ($1.3 billion), or HK$4.05 a share, in the six months ended Dec. 31, from HK$6.51 billion, or HK$2.54 a share, a year earlier, the Hong Kong-based company said in a filing to the city’s stock exchange today. This compares with the HK$9.79 billion median estimate of five analysts surveyed by Bloomberg.
Property prices in Hong Kong rose 20 percent last year, fuelled by an economic recovery and record low mortgage rates, leading the government to raise down payments and transactions taxes, and increase land supply to prevent a bubble. While those measures have crimped developers’ shares, Sung Hung Kai booked profits from luxury harbor-front projects including Larvotto and The Latitude. The city is the world’s most expensive place to buy a home, according to Savills Plc.
“Sun Hung Kai remains our top pick owing to its attractive valuation and large exposure to investment property,” Hong Kong-based analysts at Bank of America Corp.’s Merrill Lynch & Co. unit led by Raymond Ngai wrote in a Feb. 23 report. “We may see a rebound of property stocks in the near term.”
An index tracking the city’s biggest developers has dropped 3.9 percent this year. Sun Hung Kai’s shares have fallen 2.6 percent this year and rose 1.2 percent to HK$125.80 at the 4 p.m. close in Hong Kong today, before earnings were announced.
Larvotto
The company’s revenue from property sales, including joint ventures, rose to HK$28.8 billion from HK$4.61 billion.
Sales at Larvotto in the Hong Kong Island South district and at the Valais at Beas River in the New Territories “contributed to this encouraging performance,” according to the statement. Both projects were more than 90 percent sold shortly after going on the market, it said.
Profit from property sales rose by HK$6.8 billion to HK$8.9 billion from “substantial increase” in sales for residential projects including Aria, The Latitude, Larvotto and The Orchard Residences in Singapore, the statement said.
Hong Kong home prices have risen more than 60 percent in the past two years, fueled by an economic recovery, record-low mortgage rates and buying by rich Chinese, according to an index compiled by Centaline Property Agency Ltd. The jump has raised concern the property market may overheat, leading the government to implement measures to cool the market.
The city’s home market fundamentals are “positive,” Vice Chairman Thomas Kwok said at a press conference after the earnings.
Office Rents
The developer expects revenue from property sales to reach HK$28 billion in 2011, Chow Kwok-yin, acting executive director, said at a press conference in Hong Kong after the earnings.
The company, which owns and operates the International Finance Centre and the International Commerce Centre, Hong Kong’s two tallest skyscrapers, also benefited from rising office and retail rents in the city.
Net rental income rose 16 percent to HK$4.6 billion, today’s statement said.
“Office rents are likely to keep rising, given relatively tight new supply and greater demand for quality office space,” the developer said in the statement. “Retail rents should also continue to go up with higher local consumption and more mainland tourist spending.”
Hong Kong has become the world’s most expensive place to rent an office, according to New York-based real estate services firm Cushman & Wakefield Ltd. Prime office rents in Hong Kong, excluding taxes and service charges, surged 51 percent last year to HK$139.50 per square foot, 29 percent higher than Tokyo’s HK$107.80, according to Cushman & Wakefield
Dividend
Deputy Chairmen Thomas and Raymond Kwok, sons of Chairwoman Kwong Siu-hing and the company’s late founder, Kwok Tak Seng, took over running Sun Hung Kai in May 2008 after ousting elder brother Walter Kwok from the chairmanship. The family’s combined wealth of $17 billion is third on Forbes Magazine’s list of Hong Kong’s richest.
The company will pay an interim dividend of 95 Hong Kong cents a share, compared with 85 Hong Kong cents a year earlier.
To contact the reporters on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net; Sophie Leung in Hong Kong at sleung59@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net
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